Canada’s trade flows continue to face tariff-related difficulties…
Illustration photo – Photo: Bloomberg.
Canada’s goods trade deficit widened sharply in August 2025 to its second-highest level on record, as goods exports declined.
According to data released by Statistics Canada on October 7, the country’s goods trade deficit increased to 6.32 billion Canadian dollars (CAD), equivalent to about 4.53 billion USD, from 3.82 billion CAD in July.
This deficit figure is higher than the 5.6 billion CAD deficit forecast by analysts. This is the 7th consecutive month that Canada has faced a trade deficit, in the context of increasing trade volatility after the US President Donald Trump’s administration imposed a series of new tariffs.
Canada’s exports fell in August for the first time in four months as the recovery in shipments to the US market seen in previous months began to wane. Exports to the US were further hampered by new tariffs on specific sectors such as lumber, copper and aluminum. In addition, exports to countries other than the US also declined for the third consecutive month despite Ottawa’s efforts to reduce its dependence on the US market.
Shelly Kaushik, senior economist at Bank of Montreal Capital Markets, said Canada’s trade flows continue to face tariff-related difficulties. The Canadian economy has been hit hard by the Trump administration’s abrupt shift in trade policy and the imposition of tariffs, particularly tariffs on manufacturing and wholesale industries that rely on cross-border trade with the United States, Canada’s largest market.
The decline in trade, combined with a drop in business investment, led to a sharper-than-expected contraction in the Canadian economy in the second quarter of 2025, despite some recent signs of modest recovery.
Canada’s total merchandise exports fell 3% in August from July to $60.58 billion. By volume, the country’s merchandise exports fell 2.8% in August from July.
After falling in July, August imports rose 0.9% month-on-month to CAD 66.91 billion, but mainly due to increased gold imports.
Canadian exports to the US fell 3.4% in August, while imports from the US fell 1.4%. Canadian exports to the US in the first eight months of the year were down 3.3% compared to the same period last year, while imports from the US fell 0.5%.
The change caused Canada’s goods trade surplus with the United States to fall to $6.43 billion in August from $7.42 billion in July.
With exports to countries other than the U.S. down 2% and imports up 4.2% to a record high, Canada’s deficit with non-U.S. countries widened to an all-time high of about $12.8 billion in August from $11.2 billion in July.
Canadian trade will face new challenges in the coming months due to new sectoral tariffs imposed by the United States on items including pharmaceuticals and trucks, analysts say.
Leave a Reply